ST. MARYS - City officials recently learned the city will be billed $2.7 million for terminating a contract it had with a nonprofit corporation to build a coal-fired power plant.

In 2009, American Municipal Power (AMP) member communities in Ohio, Michigan, West Virginia and Virginia agreed to construct a base-load coal power plant in Meigs County. The plant would have supplied electricity to 81 member communities, which include St. Marys, Celina, New Bremen and Minster.

"At the time, studies were done and AMP members agreed it was more economical to build the coal power plant," St. Marys electric superintendent Jerry Wolfe said this morning.

The city agreed to the $2.7 million cost to help fund the project. However, from May to November 2009, the cost of the project unexpectedly increased by 37 percent. AMP board of trustees and participating communities agreed to terminate the project and require parties involved to cover the costs.

Those communities have united and are seeking litigation over the billed costs. St. Marys city officials say the city should not have to pay the entire $2.7 million agreed to in the contract because the plant was never constructed.

Celina city officials in the past have said AMP spent $144 million on the estimated $3-4 billion coal plant before scrapping plans. Celina Community and Economic Development Director Kent Bryan was unavailable for comment this morning.

Wolfe met with city council electric committee members Monday evening to discuss the $2.7 million cost.

St. Marys has been given five payment options, he said. The city can pay the lump sum upfront, make payments over five, 10 or 15 years or wait until litigation. If they make payments or wait until litigation, they will pay a 1.6 percent interest rate.

Wolfe recommended paying the lump sum upfront using money from the electric fund, which has a balance of more than $6.5 million.

"We'll still have about $4 million left in the fund if anything comes up," Wolfe said.

Commitee member Jim Harris asked if the city had any upcoming projects that would suffer if they took the money from the fund. Wolfe said no.

Safety service director Tom Hitchcock said they would need to appropriate the money in the budget and seek council approval. He asked if they should amend the 2011 budget or wait and add it to the 2012 budget. The committee agreed to add it to the 2012 budget.

If St. Marys and other participants succeed in litigation, the city would then receive a full or partial refund, depending on litigation results, Wolfe said.